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Row over cuts to councils as Scottish budget delivered

Derek Mackay says local authorities are getting £241m extra but Labour say they face £327m in cuts.

Spending plans: Derek Mackay set out his chosen measures.
Spending plans: Derek Mackay set out his chosen measures. PA

A row has broken out over council cuts following the announcement of the Scottish budget.

Derek Mackay used his first budget as finance secretary to announce £240m in additional funds for local authorities in Scotland.

But Scottish Labour claimed the small print of the proposals included cuts worth £327m.

Labour leader Kezia Dugdale said: "The SNP finance secretary has unveiled a budget today that will see the heart ripped out of public services. School results and teacher numbers are in decline. Our valued NHS workers are overstretched.

"However the finance secretary tries to spin it, today's budget means a real terms cut of £327m from the SNP government to local services.

"And they're making up the difference by holding councils to ransom - forcing them to use their tax powers, while they refuse to use theirs."

Mackay told the chamber his budget would inject £700m into the economy and the public sector and £300m would be ploughed into NHS coffers, equivalent to £120m more than inflation.

The cabinet secretary also confirmed he would not increase the basic rate of income tax in Scotland, even though ministers now have the power to do so.

He told MSPs at Holyrood: "In using the Scotland Act income tax powers for the very first time, we must have a balanced approach.

"Let me be clear, I will not pass the costs of UK austerity on to the household budgets of the lowest-income taxpayers."

He confirmed the threshold for the 40p rate of tax would only rise by the rate of inflation in Scotland - meaning the higher rate will be paid by those earning £43,430 north of the border compared to the £45,000 in the rest of the UK.

Mackay said it meant his budget would "not give a substantial real-terms tax cut to the top 10% of income earners".

He said he "sympathised" with calls for the 50p top rate of income tax to be reintroduced in Scotland for those earning £150,000 a year or more.

"I have had to balance that with the risk to our economy and am maintaining the current rate," Mr Mackay told MSPs.

He insisted this approach had been "endorsed by the electorate" and was the "right thing to do for our economy, jobs and public services".

https://stv.tv/news/politics/1375814-at-a-glance-key-points-of-the-scottish-government-budget/ | default

The Scottish Conservatives slammed the minister's approach, however, saying different tax burdens in Scotland and the rest of the UK would make it more difficult to do business in Scotland.

Shadow finance secretary Murdo Fraser said: "The finance secretary received an extra £140m from the Treasury compared to the current year, plus an extra £800m for capital spending. 

"He also has huge new powers over tax to deliver real growth in Scotland.

"However, Mr Mackay has chosen to hike taxes on families and businesses, risking a choking of economic recovery. That will only deprive Scottish public services of vital tax revenue.

"In not matching the UK increase in the threshold for the 40% rate of income tax, the finance secretary is making Scotland the most expensive part of the UK in which to live, work and do business."

The measures on income tax directly followed the proposals the SNP had already set out in the run-up to May's Holyrood election.

Mackay announced one change in tax, however, saying he had dropped plans to give the extra funds raised by increasing council tax charges for those in the largest homes directly to schools in a bid to boost education.

This approach was widely criticised by opposition parties at Holyrood and council leaders, who feared it would undermine local democracy.

Instead of the money coming from the revenues created by raising council-tax charges for properties in bands E to H, Mackay said the Scottish Government would give £120m to schools to be "spent at the discretion of teachers".

He said: "I will not sacrifice the educational chances of Scotland's poorest pupils. I will not abandon our radical plan to give schools direct control over significant new resources."

The SNP no longer enjoys a majority in the Scottish Parliament and will have to compromise with one or more opposition party if its budget is to pass.

Scottish Liberal Democrat leader Willie Rennie said: "The First Minister said today that there were acres of common ground between the parties but can I tell the finance secretary that he has got miles to travel before we can reach an agreement.

"Liberal Democrats will be pragmatic and reasonable in negotiations but it is the finance secretary who needs to be prepared to make drastic changes that will deliver the investment our education needs and subsequently the boost our economy requires."

Meanwhile Patrick Harvie, Scottish Greens co-convener and finance spokesman, said: "It's clear that there is much to be worked on in this budget if it is to be passed, and Green MSPs will scrutinise the details carefully over the coming days and weeks. 

"We will encourage the Scottish Government to raise its ambition ahead of next month's vote to set income tax rates and February's vote on the budget itself."

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